I take it all back. It’s officially retracted. Like the White House when forced to release documents, I’m “redacting” it; any future reproductions of that previous column are to be published only with all the text marked over in heavy, black marker.
You see, I had once written that it simply wasn’t possible for those attempting to convert credit unions into banks to top themselves, to demonstrate any more chutzpah, to be more hypocritical or dishonest. I had foolishly believed the charter-converters and the powers behind them couldn’t be more audacious than their previous claims that becoming a bank is “better” for the consumer, that “your” board of directors is acting in “your best interests,” that divvying up the equity that belongs to everyone among insiders was OK because “everyone” would be getting “enhanced products and services,” that once converted to a mutual savings bank it might, perhaps, could, gee-we-might-consider becoming a publicly traded bank and hey, one member, one vote is just like one dollar, one vote, isn’t it?
And then along came First Basin Credit Union, and I learned I was wrong.
Flagged for Interference?
The Odessa, Texas-based First Basin has filed a lawsuit against a group of members for essentially “interfering” in the credit union’s internal affairs (CU Journal, July 28). That’s right–the members are being sued for interfering in an institution they own!
Technically, the suit, filed against a group that calls itself “Save First Basin” and which is made up of members (also known as owners) who oppose the conversion, and against the National Center for Member Trust and Durham, N.C.-based Self-Help CU, states that the group has “tortuously” interfered with First Basin Credit Union’s attempts to convert charters by disseminating false information to other members. The suit goes on to allege that the defendants or “individuals at their discretion” contacted and warned members they would lose their deposits and their accounts would be closed; and that the officers and directors had a conflict of interest and would make money in the conversion.
The credit union is seeking $600,000 in damages, primarily from the two organizations, and permanent injunction against six members.
Perhaps if the credit union wins it could use the funds to offset the members’ money it has spent attempting to convert to a bank and file the lawsuit.
Randy Chambers, a board member of the National Center for Member Trust, summed it up pretty nicely when he told CUNA, “It’s outrageous that a credit union CEO is attacking its members for engaging in free speech and rights they have under NCUA regulations and the U.S. Constitution. Members have a right and an obligation to determine whether their credit union becomes a bank. This goes beyond the pale.”
Danny Armstrong, a school teacher who is one of the members named as a defendant, was quoted as saying, “This is our credit union. My institution is suing me for letting people know that what the leadership was doing was not in the best interest of the members…I’m disappointed it’s come to this. As an owner and member, I don’t appreciate my assets used against me and wasted.”
Now there is a teacher offering up some real lessons for everyone.
All of the defendants are promising a vigorous defense and they deserve to have other credit union folks standing with them. In democracies–which credit unions consistently claim to be–defending the fundamentals of the democracy is never someone else’s fight. It’s everyone’s.
Another Reason For Concern
If you don’t believe in any of that or consider it all to be just too philosophical, then here’s another reason to be concerned. Just a few weeks before the one group of members at First Basin filed suit against another, in Dublin, Ohio, Ohio Central Savings, one of the first credit unions to convert to a mutual savings bank, said it has agreed to be acquired by First Place Bank, a $1.7-billion S&L in nearby Warren, Ohio.
As Credit Union Journal’s Ed Roberts reported, Ohio Central, chartered in 1949 as Ohio Central FCU, converted to a mutual savings bank in 1998 and was one of the first credit union converts to sell stock to the public. The erstwhile credit union had $29 million in assets when it converted and has $65 million today. Of the 33 credit unions that have converted to mutual savings banks, 14 have been merged or taken over.
There isn’t a credit union in the country that, if converted to a bank charter, wouldn’t be a tasty acquisition target, and that includes $38-billion Navy Federal. No bank acquires another in order to add management positions.
The lawsuit in Texas is a lawsuit in which you and your members are indirect defendants, not just as a credit union but as a citizen of the country. Pay attention to it and get involved if you can.
As for me, I hereby make no further claims that the charter converters and all related parties can’t out-do themselves.
Frank J. Diekmann can be reached at fdiekmann<at>cujournal.com. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com